Debt funds v/s Fixed Deposits - help

[nikhilfake]

Hello

I am a 24 year old guy looking to diversify my investments to equity , debt and fixed instruments. I have invested about 40% of my savings in equity MFs like HDFC Top 200, Reliance Reg Savings Equity and Sundaram Select Midcap.

For debt instruments, I am caught thinking between MFs like medium-term, short-term and floating rate etc. I planned on investing in FD's which give 6% interest rate and are still taxable. My outlook for 50% of debt funds is 2-3 years and for rest is 1 yr. Can you please suggest differences in rates for Debt MF v/s FD's? Also please suggest 4-5 good debt MFs for both the time periods.

Thanks!
Nikhil

[chetan]

Well you are still very young and you should have at least 100-24 = 76% allotted to Equity and the balance to DEBT.

FDs Vs Pure Debt funds - Yield is the same which is a factor of RBI's repo rate policy. I'd suggest you to go for Mutual Funds Monthly Income Plan (give Cumulative Option) which invest 10-20% of their folio into equity and the rest 80% in Debt. Yield curve is better than FD and Debt Funds.

If I were you, I would put 100% in Equity at least for the next 6 years :-)

[nikhilfake]

Sir

thanks for the reply. I am wondering how RBI policy is affecting the MF yield since most of them invest in corporate bonds like REC, IOC etc. Also how are they showing 10 per cent annual returns for last 3 years.


What funds do you recommend ?

Thanks !!

[sunil]

how RBI policy is affecting the MF yield since most of them invest in corporate bonds like REC, IOC etc. Also how are they showing 10 per cent annual returns for last 3 years.


What funds do you recommend ?

Thanks !!

Mutual Funds BUY and Sell Corporate Debt [A Big Market, not currently available for Retail Investors] which change due to RBI Repo Rates etc. Sometimes they take the risk of lower rated companies or inter-corporate deposits or CALL MONEY and hence try to maximize the yield.

Even I'd like to suggest you to go for Monthly Income Plan Debt Funds which take some equity exposure and will help you get better yield.